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A year before the torch-lighting of the 2002 Salt Lake Winter Olympics, Mitt Romney's leadership was earning him mentions as a candidate for governor - in two states.

Future public service was likely, he declared, either in Massachusetts or Utah, where some pundits theorized he might fit in as a Democrat. Speculation increased about a run in conservative Utah when he objected to a July 2001 story in the Salt Lake Tribune describing him as ''prochoice'' on abortion. ''I do not wish to be labeled prochoice,'' his letter to the editor said.

Late in 2001, a column in Salt Lake City's Deseret News, headlined ''Romney has a shot at Utah governorship,'' cited sources close to Romney who believed ''he wants a position with enough national exposure to launch a presidential campaign.''

Massachusetts was clearly the bigger launch pad, but there was an impediment Jane M. Swift, who had become acting governor when Paul Cellucci became ambassador to Canada. She was preparing to run in 2002, and Romney had said there was little chance he would challenge a sitting Republican.

Swift, however, was slipping into free fall after political missteps compounded earlier ethical transgressions that had resulted in a $1,250 fine for using her aides as babysitters.
Panic-stricken Republican activists feared the loss of the governorship, their only prize in the lopsidedly Democratic state.

Part 6

More on Romney

Antitax activist Barbara Anderson recalls leaving the following message on Romney's answering machine: ''I know you're really 8busy now with the Olympics, but when you're finished, please come back and save Massachusetts.''

The state party's new chairwoman, Kerry Healey, discreetly flew to Salt Lake City to gauge his intentions. He was noncommittal.

When the games closed on Feb. 24, Romney recorded an amazing favorability rating of 87 percent in a Deseret News/KSL-TV poll. In Massachusetts, Romney's own poll showed he would be a viable candidate against any Democrat.

Meanwhile, his agents were quietly hiring staff and consultants, and scheduling a formal announcement - whether Swift was in or out.

Ann Romney's health was a factor in the decision. A day before returning to Massachusetts, she told a Globe reporter that she had reservations about the move because her multiple sclerosis symptoms had abated during three years in Utah. ''It's the one thing that's keeping us .....'' she said before her husband interjected: ''Careful. Hold it. Don't finish that sentence .....''

But she did, saying she had ''huge qualms because I've been healthy out here.''

The next day, March 17, the Romneys flew to Massachusetts, met at the airport by reporters and a Boston Herald poll that showed Romney crushing Swift by a 75 percent to 12 percent in a race for the GOP nomination.

Within 48 hours, Swift pulled out of the race at a tearful State House press conference.

That afternoon, Romney made his candidacy official. ''Lest there be any doubt, I'm in,'' he told reporters.

The next day, he deposited $75,000 in a new campaign account, the first installment of $6.3 million of his own money he would spend on the race.

Romney's aides feared that his wealth could spark criticism that he was a cold-hearted capitalist, as it did in his 1994 Senate campaign.

Romney said he would remain neutral in the lieutenant governor's race, but his loyal wingman Bob White and campaign strategist Mike Murphy were working to avert a Romney-Rappaport ticket of two rich white men.

After evaluating a list of potential candidates, they settled on Healey, a bright but little-known figure who had two failed legislative campaigns behind her and and a wealthy husband who could neutralize Rappaport's self-funding.

''White and I had to go give Rappaport the bad news at his headquarters,'' Murphy recalled. ''He actually took it pretty well, a lot better than his staff did. ..... Then we had to take the walk of shame with his whole staff staring at us.''

Kerry Healey went on to beat Rappaport, but the expedience of the alliance was evident at the outset when Romney called his new partner ''Sherry'' on a radio show.

Residency challenge

The Mitt Romney who hit the campaign trail in 2002 was a different man than the promising neophyte of 1994. Romney was now a media star - People magazine would soon name him one of the 50 Most Beautiful People in the World. He was also wiser in the ways of politics and supremely confident.
Within days his campaign had produced television advertisements for a rapid response to any Democratic attacks. It was a lesson learned from the Kennedy onslaught in '94.

''I am going to be the one defining myself to the voters on who I am and what I will do as governor,'' Romney told the Worcester Telegram & Gazette. ''This time I'll win.''

His uncontested march to the Republican nomination soon hit a roadblock when the Massachusetts Democratic Party challenged his candidacy, contending Romney's three years in Utah disqualified him because the Massachusetts Constitution requires seven years of residency before the election.

Initially, Romney's campaign insisted that he had filed his federal income taxes as a resident of Massachusetts. But soon after, he acknowledged he had filed as a Utah resident for two years and had amended those tax returns after announcing his candidacy to show Massachusetts as his home.

Democrats contended that Romney, who had owned homes in Belmont since 1971, had been reserving the option of running for office in Utah.

Romney was incensed: ''Any effort to try to remove me by hook and crook and trick and legal machinations is going to end up failing,'' he told reporters.

Over three days in June, the state Ballot Law Commission heard evidence about his tax returns and the fact that the Romneys' Utah home had been classified as his ''primary residence,'' giving him an $18,000 property-tax break each of three years.

Romney attributed the mistakes to his accountant and the local tax assessor, who under oath acknowledged the error and after the commission proceedings, sent him a new bill to recoup $54,587.

If the tax filings suggested Romney was hedging his political bets, the evidence also showed he always maintained his Belmont voting address - choosing George W. Bush over John McCain in the 2000 Republican presidential primary, he recently said - and had returned for special occasions while in Utah, maintaining ties to Bay State boards and organizations.

''He never severed his ties to Massachusetts,'' and ''his testimony was credible in all respects,'' the board concluded in a unanimous, 41-page decision.

The assault on Romney brought him sympathy, and he accused Democrats of ''ridiculous, dirty politics.''

Peddling change

The fight over Romney's residence proved to be a good tuneup for the race against his Democratic opponent, Shannon P. O'Brien, a former legislator and the state's first female treasurer, who won a rugged four-way primary but spent $4.5 million, draining her campaign chest.

The feisty, Yale-educated O'Brien came from a family that had been active in Massachusetts politics for four generations.

At the outset, O'Brien was the aggressor, attacking Romney incessantly on trustworthiness and needling him on issues, including his now nuanced support for abortion rights. More broadly, she painted him as out of touch with average voters.

In her primary night victory speech, she declared: ''Massachusetts doesn't need a governor who thinks getting in touch with working people is a costume party.'' It was a jibe at Romney's photo-op ''work days'' on the stump, taking a turn at blue-collar jobs to soften his privileged image.

Romney assumed the demeanor of an amiable, if somewhat stiff regular guy who was free of IOUs at the State House.

In a state where Democrats outnumbered Republicans by almost a 3-to-1 ratio, Romney rarely identified himself as a Republican. He positioned himself as an agent of change, vowing to ''clean up the mess on Beacon Hill.'' It was a direct appeal to independent voters, who make up half the Massachusetts electorate.

The Republican party had owned the corner office for 12 years, but neither Romney nor his running mate Healey had ties to government, the GOP's own cronyism, or oversight of the granddaddy of all messes - the cost overruns and mismanagement of the $14.6-billion Big Dig highway project in Boston.
With the state losing jobs and facing a ballooning budget deficit, Romney and O'Brien clashed over their managerial experience, job creation, and budget plans.

''Absolutely,'' Romney insisted, he could cut $1 billion from the state's $23 billion budget by eliminating ''waste, fraud, and mismanagement'' - while rolling back taxes over several years.
Neither candidate took a no-new-taxes pledge, but Romney vowed to fight any tax increase and painted O'Brien as a tax-and-spender.

He favored the death penalty and an initiative petition to replace bilingual education with English immersion; she opposed both. O'Brien favored civil unions; Romney did not, but endorsed certain rights for same-sex partners.

Battle of the ads

Despite his efforts to show concern for working people at job sites, Romney struggled to connect with average voters.

One of his TV ads seemed to revive doubts about his too-perfect life - an issue that had hurt his Senate candidacy after Ann said they had never had an argument. Called ''Ann,'' the spot featured the Romneys talking about their storybook romance and family. Ann said Mitt was ''very romantic'' on their first date, a prom. Mitt professed his love for his wife (''Ann's just good to the core''). It closed with video of Mitt in a bathing suit, horsing around with his sons on a raft at the lake.

Romney's poll numbers tumbled. Three weeks into the seven-week general-election campaign, he trailed O'Brien by 10 points in his own tracking. Internally, some advisers thought the cloying tone of the ad encased the candidate in plastic.

''I think it made [Mitt] appear to be too perfect,'' recalled Murphy, the irreverent strategist and media consultant who crafted the ad and insisted it would have worked in any other state. ''There's a certain cynicism in the Massachusetts electorate, and it locked into that.''

In the next four weeks, however, Romney climbed back into the race - helped by O'Brien, who made two blunders that eroded her centrist image. She embraced gay marriage - a year before the Supreme Judicial Court ordered it - and, in the final debate, endorsed a lower age of 16 for abortions without parental consent.

Murphy, meanwhile, produced two devastating ads that featured a ''watchdog,'' Duncan the basset hound, snoozing as men removed bags of money from the state treasury. Using humor, the ads fused loosely related issues - including $7 billion in state pension fund losses in the stock market crash on O'Brien's watch and the lobbying work of O'Brien's husband - to shake her credentials as a manager and cast her as an insider.

O'Brien called the ad ''as disgraceful as it is inaccurate,'' but it worked. At the same time, O'Brien's ads exhumed the robber-baron line of attack from the 1994 race, one featuring a steelworker who lost a job in a shutdown of a Kansas City plant bought by Bain Capital. Romney, however, was in Utah, running the Olympics at the time.

''It was the Ted Kennedy punch, but it was gone,'' Michael Travaglini, O'Brien's chief deputy, recalled. ''The Olympics had made Mitt a real celebrity. That carried significant weight, and it made him more credible.''

On Nov. 5, the Romney-Healey ticket romped, defeating O'Brien and her running mate, Christopher Gabrieli, by 106,000 votes, or 5 percent, of 2.2 million cast. The Republicans held their tiny base, swept the independent-rich towns of the Interstate-495 crescent, and held down Democratic margins in the urban strongholds.

Forty years after George Romney won his first election, his son had captured his first political office. Both were 55 when elected governor.

Romney thundered to his supporters gathered at a downtown Boston hotel, ''Tonight we sent a loud and clear message. ..... The message is that patronage and mismanagement are unacceptable.''

CEO governor

As 70th governor of the Commonwealth, Romney followed in the footsteps of some famous men - three signers of the Declaration of Independence (John Hancock, Samuel Adams, and Elbridge Gerry) and a future US president (Calvin Coolidge).

But Romney was the state's first self-styled CEO governor.

His Cabinet choices seemed to reflect a new approach, creating a ''wow'' effect with high-powered members like such as Democrats Robert C. Pozen, former vice chairman of Fidelity Investments, and Douglas I. Foy, longtime president of the Conservation Law Foundation. They were the biggest names in a strong lineup and Romney gave both broad authority over new ''super-secretariats.''

Assuming office midway in the fiscal year, Romney's team inherited a fiscal meltdown requiring immediate steps to close a potential $650 million shortfall. Worse, budget writers for the incoming governor discovered the projected deficit for the following year was exploding - from $2 billion to $3 billion in a $23-billion budget.

The fiscal crisis was deja vu for Eric A. Kriss, Romney's secretary of administration and finance. Under William F. Weld, during the recession in the early 1990s, he had been assistant secretary.

''There were a lot of similar characteristics,'' said Kriss, who had worked with Romney at Bain & Company and Bain Capital. ''It was one of those perfect storms.''

From the outset, Romney's team maintained tight control of information and displayed a disciplined, centralized management style. The administration spoke with one voice, usually Romney's.

Assisted by Boston-based management consultants who donated their time during the transition, Romney's new team scoured the bureaucracy, culling data in a search for inefficiency, waste, and savings.

The work formed the basis of a blueprint that Romney called ''the most significant restructuring of state government in half a century.'' Sensing a mandate, the new governor wanted to reorganize whole sectors of government at a time when state finances were deteriorating.

Romney specifically aimed to overhaul the sprawling human services system, a court network beset by legislative meddling, and the 29-campus higher education system. At the same time, he wanted to reform Civil Service, loosen the teachers unions' influence on public education, and fix the state's troubled school-building assistance program.

Romney's team initiated many efficiencies administratively, for instance integrating 15 human services agencies, but the Legislature balked at many of his proposals, including the court system consolidation, and only pieces of the broader reorganization plan were implemented.
The budget cuts were often deep and painful, but Anderson, the antitax crusader who had begged Romney to run for governor, identified a tradeoff.

''What people don't credit him for is what he prevented from happening ..... a [broad-based] tax increase,'' she said.

Balancing act

Romney's success in steering the state through the fiscal maelstrom was one of his key achievements, but in the retelling he and his aides often overstate the accomplishment and understate the side-effects: big fee increases and pressure on local property taxes.

The website of his presidential campaign summarizes his version of history: ''Without raising taxes or increasing debt, Governor Romney closed a $3 billion budget deficit his first year in office with a heavily Democrat (sic) legislature. Each year, Governor Romney filed a balanced budget without raising taxes. By eliminating waste, streamlining government, and enacting comprehensive economic reforms to help spur growth, Governor Romney helped the state achieve a surplus totaling nearly $1 billion in 2005.''

Romney and the Legislature did approve an austere budget to deal with nearly all of a projected shortfall, which never fully materialized because tax collections came in more than $1.2 billion above preliminary estimates. The spending plan also raised at least $331 million through increased fees for permits, licenses, and services - about a 45-percent jump - and $128 million in tax code tweakings to close ''loopholes'' affecting businesses. Another $181 million in ''loophole'' closings - businesses called them tax increases - followed in the next two years.

Romney has asserted that the fee increases totaled only $260 million in fiscal 2004 but that ignores at least $71 million in new fees implemented shortly after he took office.

One major fee hike was clearly excessive - a 2-cent-per-gallon increase in a special gasoline fee, implemented during the fiscal crisis without fanfare, even though it affects every motorist in the state.

The increase generates about $60 million per year for a program to clean up contamination around underground fuel storage tanks, but since its inception has produced surpluses of more than $40 million a year above the actual cost of the program, according to a report done by the Department of Revenue in response to a Globe request.

Raised from half a cent to 2.5 cents per gallon in April 2003, ostensibly to pay for a backlog of cleanup claims, the fee is on top of the 21-cent-per-gallon state tax on gasoline.

The effects of the initial deep spending cuts are still being felt, especially in cities and towns, which absorbed reductions of about $400 million, or 9 percent, in the first 18 months of Romney's term.

Cities and towns now rely on property taxes to pay 53 percent of their budgets, a 25-year high and up from 49 percent before Romney took office, said Geoffrey Beckwith, executive director of the Massachusetts Municipal Association. Many communities cut services and raised fees as a result, he said.

Eric Fehrnstrom, Romney's spokesman, said local officials exaggerate the impact of the cuts, which were a response to a nearly 15-percent plunge in state tax revenues one year.

''Cities and towns share in the state's revenues when times are good, but they also must share in the belt-tightening when times are bad,'' he said.

Data compiled by The Tax Foundation, a nonpartisan research group in Washington, shows that during Romney's four years as governor, the state and local tax burden in Massachusetts increased from 10 percent to 10.6 percent of per capita income.

Another shift hit students at state colleges and universities, where fees soared 63 percent during Romney's tenure, from an average of $2,959 in 2003 to $4,836 in 2007, according to the state Board of Higher Education. The fee hikes were enacted by each campus to offset deep budget cuts of about $140 million, or about 14 percent,during the fiscal crisis.

Of Romney's assertion about the 2005 surplus, ''There never was a $1 billion surplus,'' said Michael J. Widmer, president of the business-funded Massachusetts Taxpayers Foundation.

The state comptroller's office reported a surplus of $594.4 million, but Widmer said that overstates the true surplus because it includes a $150-million accounting change that pushed payment of Medicaid bills into the next fiscal year.

Early in his administration, Romney contended that he squeezed more than $1 billion in waste out of the budget. ''I said at the time it was no more than $100 million in waste he eliminated through reforms, and I was being very generous,'' Widmer said. ''Reform had next to nothing to do with the change in the state's financial picture.''

Fehrnstrom replied that there were many internal efficiencies that produced savings. ''We wanted people to get more efficient, so we cut budgets,'' he said.

As a candidate for governor, Romney vowed to slash the state bureaucracy and now, on the presidential campaign trail, frequently says: ''One commentator said that I didn't just go after the sacred cows, I went after the whole herd.'' After four years, he reduced the payroll of agencies under his direct control by 603 jobs, to 43,979, according to his administration's tally.

By contrast, one of his predecessors, Weld, closed state hospitals, privatized services, and slashed about 7,700 jobs in his first term.

Showdown with Bulger

In his first year as governor, Romney zeroed in on reorganizing higher education by breaking up the five-campus University of Massachusetts system and eliminating the president's office. Major industries in the state objected, and the Legislature rejected the plan, but Romney's efforts ultimately forced out President William M. Bulger, the former state Senate president.

Bulger was a foil from central casting - an erudite and cunning pol from South Boston. A powerful figure during 42 years in state government, Bulger enjoyed support among Democrats on Beacon Hill but little with the general public, weakened as he was by embarrassing disclosures about his contact with his brother, fugitive mobster James ''Whitey'' Bulger, who was accused of 19 murders.

Before Romney took office, Bulger had invoked his Fifth Amendment privilege before a congressional committee and in June faced a climactic second congressional appearance, testifying under a grant of immunity.
Days before the testimony, however, Attorney General Thomas F. Reilly broke ranks with Democrats and called for Bulger's resignation. The next day, Romney said he might call on the UMass trustees to remove Bulger.

After trustees rebuffed Romney, praising Bulger's job performance, Romney began to frame the conflict in moralistic terms, saying Bulger should be held to ''a much higher standard'' even if he committed no crime.

Trustees chairwoman Grace K. Fey, Bulger, and other backers on the board worried that UMass would suffer retaliation by Romney if Bulger survived. Lawyers negotiated a buyout of the remaining four years on Bulger's contract, and he resigned.

It was a triumph for Romney and his outsider politics.

Romney had no personal relationship with Bulger as he pushed him out the door. William P. Monahan was a different story.

Three weeks after Bulger's exit, Monahan's long personal and political relationship with Romney ended abruptly with a 13-minute phone call.

''He threw me under the bus,'' Monahan said recently.

Monahan was forced out as chairman of the Civil Service Commission, a month after Romney appointed him. His hasty ouster was engineered by aides who feared the governor would be embarrassed by a Globe story about Monahan's purchase of property from Boston organized crime figures 23 years earlier.
That night, from his lake house in Wolfeboro, N.H., Romney called Monahan, who quoted him as saying: ''Bill, my stomach is turning. ..... My senior staff is unanimous that I have to ask for your resignation. I don't want to do this, but I am outvoted.''

Still bitter, the lawyer and former Belmont selectman filed a suit, now pending in US District Court against Romney and others, seeking reinstatement.

His part ownership in a Theater District building purchased from the five Angiulo brothers was a legal, arm's-length transaction that was fully disclosed and hardly a secret, he said. He was reelected selectman three times after the details first aired a decade earlier in local newspaper stories.

''When he needed me, I was always there,'' said Monahan, a backer of Romney's political campaigns and a leading supporter of the efforts of Romney's Mormon church to build a temple in Belmont.

Citing the litigation, Romney declined to discuss the case in detail but said recently: ''Had I known the full background of his involvement with the Jerry Angiulo family, I would've never appointed him in the first place.''

Romney's obsession with maintaining a pure image annoyed many Beacon Hill regulars, but it produced an administration that was virtually scandal free and restrained in the exercise of patronage.

Romney gave jobs to many of his own campaign workers, but was aggressive in ousting longtime operatives of his own Republican party, including David Balfour, head of the Metropolitan District Commission, a patronage haven that Romney would fold into another state agency.

Much later, Romney rebuffed requests that he appoint Brian P. Lees, the Republican leader in the Senate, to the open job of clerk-magistrate of Springfield District Court.

''I wanted to change the environment in Massachusetts from one of patronage to one of people getting jobs on the merit, and I didn't feel like I could make an appointment based on the fact that somebody was the minority leader of my party,'' Romney said in an interview.

Romney also sanitized the judicial selection process, requiring the nominating panel to conduct an initial blind review of candidates without knowing their names, gender, or references.

''The review process was completely apolitical,'' said Ralph C. Martin II, who chaired the Judicial Nominating Commission for half of Romney's term. A July 2005 review by the Boston Globe of Romney's judicial picks detected no philosophical or partisan pattern.

The paper reported he had ''passed over GOP lawyers for three quarters of the 36 judicial vacancies he has faced, instead tapping registered Democrats or independents including two gay lawyers who have supported expanded same-sex rights.''

Romney's hiring policies were flexible enough to tolerate some who were politically useful, however.
He found a job for Angelo R. Buonopane, a veteran of past GOP administrations, who in Romney's campaign had raised money, reached out to contacts in organized labor, and assembled an election eve rally in Boston's North End.

But in April 2005, Buonopane resigned his $108,000-a-year job after the Globe reported his post had ''no obvious duties'' and reporters observed him working an average of less than three hours on eight different days.

In his final months as governor, Romney filled more than 200 slots on boards and commissions with party loyalists, state employees, and others. Fehrnstrom, his communications director, was named to the part-time board of the Brookline Housing Authority.

After the Globe pointed out the appointment would help Fehrnstrom qualify for a large state pension, he resigned from the board, protesting ''unwarranted political attacks'' on Romney.

Risky strategy

By the start of his second year in office, Romney was preparing to go over the heads of the Democratic lawmakers who were resisting his initiatives. He decided to take his case directly to the electorate.

The outlines of what would be a frontal assault on the Democrats in the 2004 fall election emerged in his State of the State address that January. Using the word ''reform'' at least 10 times, Romney laid out his challenge.

''Quite simply, reform is about putting people first,'' Romney said. ''We have to put people we don't know ahead of political friends we do know, schoolchildren ahead of teacher unions, and taxpayers ahead of special interests.''

It was a risky strategy in a year when the state's favorite son, US Senator John F. Kerry, was winning the Democratic nomination for president and would be at the top of the November ballot.

In the past, Republican governors had tried to pick off a few legislative seats to build their numbers, but Romney personally began an aggressive recruiting drive and in May, unveiled a slate of 131 Republicans - the most in a decade - for the Legislature's 200 seats.

With Romney's help, the state party raised $3 million and sent a blizzard of direct mail attacking Democrats for supporting state college tuition discounts for illegal immigrants and being soft on sex offender laws.

For his part, Romney campaigned for more than 40 candidates with almost 70 trips around the state.
With so much advance warning, however, Democrats were ready for the fight.

For Romney and the anemic GOP, it was a train wreck. The party suffered a net loss of two seats in the House and one in the Senate.

Romney, who rarely spent political capital in pursuit of policy initiatives, had put his prestige behind his reform agenda and hand-picked candidates.